Jan 31, 2024 - Health

Good vibes for hospitals on Wall Street

Illustration of a hospital bed with a price tag.

Illustration: Aïda Amer/Axios

The stepped-up demand for medical care that's left health insurers nervous is bringing good vibes to the hospital industry, whose outlook was buoyed Tuesday by HCA Healthcare's better-than-expected fourth quarter earnings.

Why it matters: A post-pandemic surge in outpatient care driven by Medicare enrollees who deferred surgeries during the crisis has been good news for hospital operators who've also seen their margins improve and were able to reduce their reliance on costly contract labor where possible.

Details: Shares of HCA Healthcare, the largest publicly traded hospital company in the U.S., as well as Community Health Systems and Universal Health Services all saw stocks rise on Tuesday following the release of HCA's earnings.

  • Nashville-based HCA reported revenue rose to $17.3 billion, up from $15.5 billion a year earlier.
  • Admissions and emergency room visits were up in a further sign of rising demand for care.

Zoom in: Medicare Advantage admissions were up roughly 10% in the fourth quarter, consistent with the year, HCA executives told analysts during an earnings call.

  • While it's hard to break down exactly why, they said the increase comes partly due to an increase in seniors switching from traditional Medicare plans, as well as higher health care utilization.

Yes, but: It's not all smooth sailing ahead. Hospitals are looking at a 3.8% increase in drug price inflation in the year ahead, driven by specialty drugs including new gene therapies, per Vizient.

  • Congress also is still weighing an overhaul of Medicare payment policies that could affect how hospitals bill for outpatient services.
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